Debated in Parliament on 14 Jan 2013.
Order for Second Reading read.
Mdm Speaker, I beg to move, "That the Bill be now read a Second time."
The Stamp Duties (Amendment) Bill 2013 comprises seven amendments. One amendment gives legislative effect to a Budget 2012 initiative, while the remaining six amendments arose from the periodic review of the stamp duties
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regime to improve stamp duty administration and legal clarity.
In the Budget 2012 Statement, the Minister for Finance announced enhancements to the income tax and stamp duty concessions under the Mergers and Acquisitions (M&A) Scheme. These tax concessions will apply for M&As completed between 17 February 2012 and 31 March 2015 to facilitate corporate restructuring, especially amongst small and medium enterprises. In line with these enhancements, clause 2 of the Bill provides for stamp duty relief to be extended to acquisitions carried out through multiple tiers of entities, and not just through one tier of wholly-owned subsidiaries.
I will now explain the remaining six amendments in the Bill. First, clause 3 of the Bill will update the Act to clarify that stamp duty is not chargeable on the conveyance of any type of property other than immovable properties such as land, stocks or shares and interest thereof.
Secondly, we will amend the Act to clarify that property that may be the subject of Seller's Stamp Duty (SSD) is to be described by its zoning or its permitted purpose under the Planning Act. The amendment will also provide that the consideration used for computing Seller's Stamp Duty is to be reduced by an amount attributable to the part of the property that may be used for a non-prescribed purpose. This is so that the SSD is levied only on the sale of the part of property used for a prescribed purpose which is liable for the SSD. Clauses 4 and 5 of the Bill provide for this change.
Thirdly, clauses 6, 8, 9 and 10 of the Bill make technical amendments to various provisions of the Act as a result of the decommissioning of franking machines and adhesive and impressed stamps, after the implementation of electronic-stamping.
Fourthly, clause 7 of the Bill amends section 40 of the Act to extend the period for filing an appeal to the High Court against a decision of the Commissioner of Stamp Duties on a notice of objection from 21 days to 30 days. This is to align the appeal deadline with those of other tax types such as Income Tax and Goods and Services Tax.
Madam, the final two legislative changes are technical amendments. Clause 13 will enable the Minister to make subsidiary legislation to modify the application of specific sections of the Act when amendments are made to the First or Third Schedule. Clause 11 will allow "Rules" to be made to amend past remission instruments which were termed as "Orders". Mdm Speaker, I beg to
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move.
Question proposed.
Mdm Speaker, I rise in support of the Stamp Duties (Amendment) Bill.
Property prices have been on the incline as a result of the sharp increase in investment demand for private residential properties, in particular in light of Singapore's relative economic stability and our reputation for having open markets that facilitate investment flow. However, this increase in foreign investment demand, coupled with a possible mismatch on the property supply front, has caused much concern among local residents and potential first time purchasers of homes. These worries are not unfounded, with recent statistics showing that home prices are 16% higher than the recent peak in the second quarter of 2008, with foreign purchases accounting for 19% of all private residential property purchases in the second half of 2011.
In response, the Government introduced the Additional Buyer's Stamp Duty (ABSD) in December 2011, which requires foreigners and corporate entities to pay an unprecedented extra 10% stamp duty when buying a residential property in Singapore. This bid to curb excessive investment by foreign buyers and thus cool investment demand has been welcomed by some quarters, but the Government must continue to monitor the situation so as to promote a stable and sustainable residential property market in the long run. Notably, these cooling measures will affect not just foreign investors but, to a lesser degree, local speculators such as permanent residents purchasing a second property. This slew of measures was followed by a menu of measures aimed to cool the property market on Friday just last week.
However, I would like to add that in revising and analysing Singapore's property policies, the Government should also have regard to existing policy frameworks that have been implemented in other countries facing similar supply crunches and booms in demand. Singapore has always prided herself on her pragmatism and resourcefulness in the face of physical limitations, and there is much that can be tapped on with regard to other countries' best practices on the property front. There are two models I would like to raise in Parliament today for our consideration – the Hong Kong model and the Australian one (the latter is the one that I prefer) – both of which are potential
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reference points as we continue to refine and develop our property policies and stamp duty framework to meet the objectives of sustainable pricing in the property market.
It has been reported that the Hong Kong government has, in a bid to cool down its property market, introduced a 15% tax on foreign buyers while simultaneously raising stamp duties for short-term speculators as property prices overtake the record highs last seen in 1997. This, it is said, is to curb short-term speculation and stamp duties will be imposed on a sliding scale, with the Government subsequently announcing that it would ban foreigners from buying some new properties coming onto the market, making them exclusive to local buyers. That is the Hong Kong model.
But the second model, which I am particularly interested in, is the Australian model, and I raise for the sake of this House. In Australia, all acquisitions of residential real estate by foreign interests require prior foreign investment approval. As for foreign citizens living overseas, the Foreign Investment Review Board will grant approval to buy investment property as long as the property is brand new. However, these citizens and temporary residents are not eligible for first home buyer concessions, which are only available to Australian citizens and permanent residents. The Australian model essentially allows foreigners to buy new developments while restricting their subsequent sale to Australian residents at a price they can reasonably afford. This double-prevention mechanism both tempers investment demand and restricts the resale incentive, thereby providing a nuanced and sophisticated alternative to the Hong Kong model. We should carefully study this Australian model. So, essentially, what the Australian model does is to prevent foreigners from buying anything except new development in Australia and then holds on to that and, eventually if they want to sell, they can sell only to an Australian citizen. And this allows the local population to set a correct demand pricing mechanism which I feel is a good option for Singapore, that the Singapore local domestic market or the Singaporeans set the barometer for demand and a sustainable pricing mechanism for our residential property market in Singapore.
According to Minister Khaw Boon Wan in last July's review of the ABSD scheme, the combination of cooling measures introduced and the ramp up in both public and private housing supply has produced encouraging results. The proportion of private residential properties bought by foreigners and companies has fallen sharply, with a similar decrease reflected in private home prices and short-term property speculation. These measures have altogether helped home buyers to purchase their own residential property and it is certainly a step in the right direction. One group which I have in mind when
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making the speech is genuine first-time Singaporean home buyers.
As we continue to debate the proposed amendments to the Stamp Duties Act, it is important for us to constantly take a step back and have in mind the overarching objective of maintaining a sustainable residential property market, where investment demand is moderated and local ownership of residential property promoted. The positive effect of these cooling measures on reining in property prices should be considered in conjunction with measures to ramp up supply to meet such demand. Above all, the Government should remain vigilant in monitoring the property market and adjusting its policies in step with changes in the market and economy. The bottomline is property market prices must be sustainable. With that, I support the Bill.
I stand in support of the Bill. I have three short points to make. On the first point, let me first declare that it concerns me as I am the Member of Parliament for the Geylang Serai area where there are many religious institutions and also premises being used as religious institutions.
It is stated that the SSD is levied only on the sale of the part of a property used for a "prescribed purpose". What happens in the event when a residential premise or part of it is being used as a place of worship which is strictly, not a prescribed use. What will the transaction be like in this case and can the SSD then be reduced? Also clause 4 (a) which amends section 22A(8) states that the amendment allows the consideration to be reduced by an amount considered as attributable to any part of the specified immovable property which may be used under the Masterplan for a non-prescribed purpose.
Second point on section 15A, pertaining to the acquiring companies and its acquiring subsidiaries, will it be managed differently if they were local or Singapore companies versus if they were foreign or non-local companies?
And my final point, Madam, also on section 22A, when zoning under the Masterplan is altered, the SSD will also be affected accordingly. How soon will the change be effected? Will it be immediate or will the owners or the acquiring companies be given some lead time to acknowledge this change and do the needful?
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Mdm Speaker, first let me thank Mr Christopher de Souza and Assoc Prof Fatimah Lateef for supporting the Bill. Let me address the questions that have been raised by Assoc Prof Fatimah and then I will turn to Mr de Souza's points.
Assoc Prof Fatimah has asked what happens in the event when a residential premise or part of it is being used as a place of worship, which is strictly not a "prescribed use" and whether the SSD can be reduced under such circumstances. Madam, in general, public religious worship is not a permitted use on residential premises. However, if the authorities were to grant permanent permission for public religious worship to be a permitted use in a premise within a residential development, SSD will not be imposed on the sale of that part of the premise for which religious use has been permitted. I hope I did not confuse anyone.
Assoc Prof Fatimah has also mentioned that under section 22 (A) of the Stamp Duties Act, when the zoning under the Master Plan is altered, the Stamp Duty can also be affected. She asked how soon such changes will be affected and whether owners or purchasers of properties will be given sufficient time to react to the change in zoning.
Let me give an example to address this question. If the zoning of the land on which a property is situated is re-zoned from commercial to residential use, and the whole property is subsequently disposed of, the effective date of purchase for purposes of computing the holding period for the SSD will be the effective date of the new zoning. URA would publish a notice of the pending change in zoning in the local newspapers as well as exhibit the Masterplan Amendment plan at the URA at the URA centre for four weeks as the SSD is only triggered on the sale of the property. The owner of the property should take into account all the SSD implications before making any decisions to sell the property.
On the Budget 2012 enhancements to stamp duty reliefs for qualifying M&As, Assoc Prof Fatimah has asked if the relief is managed differently when the acquiring companies and acquiring subsidiaries are local companies, compared to if they were foreign companies.
The M&A incentives seek to help Singapore-based companies which carry on substantive business operations in Singapore to grow by acquisition. As such, there are conditions to ensure that the acquisition originates from a Singapore-based company which carries on substantive business operations in
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Singapore. Hence, the acquiring company has to be incorporated and tax resident in Singapore. Also, where the acquiring company belongs to a corporate group, its ultimate holding company must also be incorporated and tax resident in Singapore, but the acquiring subsidiaries can be foreign or non-local companies. I hope that addresses Assoc Prof Fatimah's questions. Let me now turn to Mr de Souza's point.
Firstly, I would like to thank him for sharing his perspectives on the property market, which all of us pay close attention to. Although this specific set of amendments do not relate to the property market, I think his views are still very relevant. He has raised the example of Australia and the restrictions on foreign property purchases in that country. I thought I would just also share with Members of the House that in Singapore, there are also restrictions placed on property purchases by foreigners. For example, the entire HDB market is completely out-of-bounds to foreigners and when you think about it also, earlier, when Minister for National Development talked about the Executive Condominiums. For the first 10 years of an Executive Condominium's existence, it cannot be sold to foreigners as well. So there are restrictions of our own in Singapore. As he has pointed out, the Government announced only last Friday the comprehensive package of measures to ensure a stable and sustainable market and as Deputy Prime Minister Tharman had indicated, these are temporary measures designed to cool the property market which will be reviewed and at an appropriate time.
During that time, references to practices in other countries are certainly useful but ultimately Singapore has to evolve in such policies that are relevant to our needs and meet our requirements. So I am sure the points that the Member has raised will be considered and at the right time given a response. On that note, Madam, I thank both Members again.
*Question put, and agreed to.*
*Bill accordingly read a Second time and committed to a Committee of the whole House.*
*The House immediately resolved itself into a Committee on the Bill. – [Mrs Josephine Teo].*
*Bill considered in Committee.*
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[Mdm Speaker in the Chair]
The citation year "2012" will be changed to "2013", as indicated in the Order Paper Supplement.
Clauses 1 to 14 inclusive ordered to stand part of the Bill.
Bill reported without amendment; read a Third time and passed.
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